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Can My Kids Contribute to their RESPs?

Jun 27, 2019

Besides putting a roof over your family’s head and food on the table, one of the best things a parent can do is help their children with the cost of post-secondary education.

Going to college or university isn’t cheap these days. Tuition is going up a lot faster than the rate of inflation. This means that students are graduating with more and more student debt. Having student debt can mean that your adult child could delay important milestones like buying their first home and getting married.

For parents there are a lot of competing financial priorities: paying the mortgage, saving for retirement, contributing to your tax-free savings account and let’s not forget saving for your child’s post-secondary education. That begs the question, let’s say your child has a part-time job, can he or she contribute to their own RESP?

Children Can Contribute to their own RESP

The short answer is, yes, kids can contribute to their own RESP. If your daughter or son has a part-time job, they can put some of their paycheque towards their RESP.

When your child contributes to their own RESP, it’s treated just like any other RESP contribution. It’s eligible for the 20 percent grant from the government. This is essentially free money. You’re leaving free money on the table if you’re not contributing the maximum $2,500 per year in your child’s RESP ($500 per year to be exact).

Teaching Your Kids Financial Literacy Skills

Besides helping reach the maximum $2,500 RESP contribution each year, when your child contributes to their own RESP, it teaches them valuable financial skills.

Many teenagers when they get their first part-time job spend their money on events, concerts and movies. While there’s nothing wrong with your child having some fun with their money, if they’re simply blowing all the money that they make on entertainment, they’re likely not learning anything.

One of the best things you can do for your teenager is teach them financial responsibility before adulthood. When you ask your teenager to contribute to their RESP, it feels more like a partnership. If you as the parent simply pay for all your child’s expenses and contribute to their RESP on your own, they aren’t as likely to value the money that you’ve saved towards their education.

As an example, if a parent saves the entire amount in their child’s RESP, when the child actually attends college or university, they might be more likely to drop courses and may not put in the same effort since it’s not their money. However, if your child worked hard at a part-time job and contributed, too, they’re more likely to put in more of an effort since they have skin in the game, too.

The facts don’t lie. With about half of Canadians living paycheque to paycheque and a lack of financial literacy courses in the school system, asking your child to contribute to their RESP is one of the best things you can do.

Matching Your Child’s Contributions

There are many ways you can do this. One way is to match your child’s contribution. So, if your child can contribute $1,250, you’ll contribute $1,250, too, so you’ll get $2,500 together and can maximize the government grant.

Sit down with your child and come up with an arrangement that works where you’re both on board. When you do this, your teen is more likely to understand and feel motivated to help put money towards their own RESP.

Your child will have more money in their RESP and learn a valuable life lesson. It’s a win-win situation.